Medicaid Cuts Ruled Out, Obama Aide Says

The White House won't accept any cuts to Medicaid funding as part of a deal on the budget, a senior aide to President Barack Obama said Thursday.

Even Medicaid cuts previously supported by the White House are now off the table, Gene Sperling, director of the National Economic Council, told attendees at conference held by the progressive health care reform advocacy group Families USA.

"We have come to believe that it is not the time to make even those savings," Sperling said, referring to the cuts the White House had proposed. "Not when this is the critical moment in implementing the Affordable Care Act."

Slashing Medicaid at the same time you're adding as many as 17 million people to it and the Children's Health Insurance Program could be seen as incoherent.

Still, Sperling's comments send an important message to the nation's governors that Obama won't pull the rug out from under them.

The White House needs more governors to opt into the health care reform law's Medicaid expansion if it wants Obamacare to reach the largest possible number of people -- especially the poorest. The Supreme Court ruling that upheld the law last year also gave states, which partly finance and administer the program, the power to refuse the Medicaid expansion. Already, 10 Republican governors have gone that route.

The health care reform law offers states a tempting financial incentive to broaden Medicaid: The federal government covers the full costs of enrolling newly eligible people for the first three years, after which the share gradually declines until it reaches 90 percent in 2022 and beyond. That compares to the average 60 percent the federal government pays for other Medicaid beneficiaries.

The four Republican governors in Arizona, Nevada, New Mexico and North Dakota cited that generous funding as a major reason to support the Medicaid expansion, as have Democratic officials in other states. Missouri Gov. Jay Nixon (D) and Arizona Gov. Jan Brewer (R) specified their states would bail on the expansion if federal funding were cut.

For states that remain on the fence, a threat that Washington would turn off the spigot in future years could influence them to forego the expansion.

State officials opposed to Obamacare routinely cite worry that the federal government will change the terms of the deal as a reason not to expand Medicaid, In Florida, for instance, Gov. Rick Scott (R) touted a cost estimate that assumed the money wouldn't come through until a local news outlet called him on it.

Medicaid is exempt from those automatic cuts, however, unlike Medicare, which stands to lose as much as $11 billion this if the White House doesn't reach an agreement with Congress, Importantly, Sperling acknowledged that the firm no on Medicaid cuts means Medicare may get hit even harder.